On 25 January 2015, the Italian government passed Legislative Decree no. 3 (hereinafter: Decree) on the banking system and investments.

Export subsidies through Agency for Foreign CommerceThe provisions authorize the Italian Agency for Foreign Commerce to issue direct loans to its customers (mainly small and medium-sized entreprises - hereinafter: SMEs). Based on the legislation's wording (art. 3(1) of the Decree) this was introduced "to support exports and the internationalisation of the Italian economy and its competitiveness". The loan issuance shall be "conducted in compliance with international, European and national norms".

Revised definition of innovative SMEsFurthermore, the Decree introduces requirements for SMEs to be classified as "innovative" in the Italian financial intermediation system - such as the obligation to possess a manufacturing plant or subsidiary within Italy or a number of residence requirements. Innovative SMEs may benefit from a number of exemptions. These include:

no duty stamp due when subscribing in the business register

exemption from the regulations on companies making systematic losses

introduction of performance pay into the remuneration system

tax incentives for private (max. 0.5 million EUR) and corporate (max. 1.8 million EUR) investments into innovative SMEs (see Sources for a detailed list of benefits).

Foreign entities eligible for tax breaks from investmentsIn addition, non-resident foreign institutional investors will no longer be required to register as taxpayers in Italy in order to be eligible for tax exemptions from their investment income on immovable assets and purchased new capital goods.

Creation of a new Corporate Funding MechanismLastly, the Decree creates a Service Fund for the Capitalization of Entreprises in order to support entities based in Italy and with growth potential despite suffering from financial difficulties. Whereas the fund will financed by institutional and professional investors, the state will be the one providing government guarantees. As stated in article 7(7) of the Decree, the exact conditions for these guaranteees shall be established by the executive branch and will need to be examined by the European Union.

The decree came into force on the day of its announcement.

The GTA includes state guarantees and other financial incentives thatare likely to affect the restructuring and performance of firms facinginternational competition, whether from imports, in export markets, andfrom foreign subsidiaries.